Winners and Losers from the euro

This paper estimates the effect of having joined the monetary union on the income per capita of six early adopters of the euro using the synthetic control method. Our estimates suggest that while the income per capita of Belgium, France, Germany and Italy would have been higher without the euro, that of Ireland would have been considerably lower. The Netherlands is estimated would have been as well off without the euro. In addition, we use the insights from the literature on the economic determinants of the costs and benefits of monetary unions to explain these income effects. We find that early euro adopters with a business cycle more synchronized to that of the union, and more open to intra-union trade and migration lost less or gained more from the euro. A key role in the transmission of post-euro income losses across union members has been played by the integration of capital markets.